АЛЕРТ: В очікуванні початку «масової приватизації»

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On the 13th September 2019 the Parliament of Ukraine adopted the draft law No.1054-1 “On Abolition of Law of Ukraine on List of Objects of State Ownership that cannot be Privatised” on its first reading.

Initially, there was another draft law No.1054 that was identified by the President of Ukraine as urgent.

However, in September the same MPs who composed the draft law No.1054 made changes and introduced the new draft law No.1054-1 to the public. Finally on the 2nd October the Bill No.1054-1 was adopted by the Parliament.

The law provides amendments to the following laws of Ukraine: On Privatisation of State and Communal Property and On List of Objects of State Ownership that cannot be Privatised.

Although the proposed amendments are very narrow compared to other current draft laws in the Ukrainian Parliament, this particular law is expected to be supportive to investment activity in Ukraine. Furthermore, it shows a clear shift from inherited aspects of the Soviet-era planned economy and a purposeful step closer to a free market economy in Ukraine.

Background

The main change introduced by this draft law will occur in the Law of Ukraine On List of Objects of State Ownership that cannot be Privatised (the “List”). The List, which will be abolished by this draft law, includes precise names and locations of public enterprises in Ukraine that cannot be privatised. The substantiation of the List is another Law of Ukraine On Privatisation of State and Communal Property that in article 4 contains criteria of state assets that cannot be privatised. Based on these criteria, the Ukrainian Parliament had adopted as a Law of Ukraine the list of specified public enterprises that cannot be sold to the private sector.

The List was first adopted in 1999 (with amendments) and includes terminals of seaports, airports, grain elevators, even airlines (for instance, Public Enterprise “Odessa Airlines”), radio centres and film studios.

Effect of adopting the draft law No.1054-1

The draft law proposes to abolish the List and make it possible to privatise such assets. However, it is only the beginning of the privatisation process. The State Property Fund of Ukraine will be responsible for the sale of state assets through an open auction process.

The draft law also amends the Law of Ukraine On Privatisation of State and Communal Property. It proposes amending the criteria of public enterprises that cannot be privatised such as military equipment manufacturers and sport infrastructure for international sporting competitions. Moreover, the draft law forbids the privatisation of state assets situated in temporarily occupied territories.

Every region has many state objects to sell (in the list you can find the most relevant examples), including a Regional Broadcasting Center, distilleries and grain elevators. Schedule 1 lists the state property that can be legally privatized as a result of this law.

Meanwhile, the State Property Fund of Ukraine this January approved the list of privatisation in 2019 that included electricity plants (Ternopil Oblenergo, Centerenergo, Kharkivoblenergo, Zaporizziaoblenergo) and Odessa Port Factory. This privatization has not occurred and a new list should be shortly prepared by the Fund and updated to reflect law No.1054-1 (as it was notified as urgent by the President of Ukraine).

Conclusion

To summarise, although the law No.1054-1 is very small in volume (only one page of a text), it determines an important aspect of state policy for coming years and aims to promote significant investment activity in Ukraine. The draft law represents a first step in the revamped process of privatisation. The decision to sell state assets remains the competence of the State Property Fund of Ukraine. Privatisation is seen a key priority among the supranational institutions supporting Ukraine and the law sends a signal to the international community that Ukraine serious about reforming its economy.

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